ASIC reiterates retail investors’ mistakes in market timing

The Australian Securities and Investments Commission (ASIC) has highlighted the failures of retail investors who are ‘not proficient’ in trying to time the market.  

In a session with the Senate select committee, ASIC commissioner Cathie Armour was questioned on the regulator’s decision issue a notice to retail investors warning of volatility in markets. 

She said the regulator had carried out the investigation after seeing increased retail activity and a change in behaviour in March and April as well as hearing anecdotal comments from market participants. 

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Armour said: “[We found] far greater numbers of retail investors were coming into the market and there were greater instances of ‘day trading’ where they were buying and selling very quickly rather than holding for the long-term.  

“This was married with a propensity to guess wrong as they made the wrong speculation. 

“Retail investors were buying just as the market fell rather than when it was going up which was a concern. 

“We wanted to make people think about trading and if they were being sensible in this volatile time.” 

Her comments were supported by the ASIC report ‘Retail investor trading during COVID-19 volatility’ which stated for more than half of the days on which retail investors were net sellers, their share price increased the next day. 

“For more than two-thirds of the days on which retail investors were net buyers, their share prices declined over the next day. For more than half of the days on which retail investors were net sellers, their share prices increased over the next day. If all retail investors held their positions for only one day, total losses would have amounted to over $230 million,” the report said. 

Source: ASIC 

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How stupid is ASIC? On one hand they say they are worried about these consumers losing money because of stupid investing mistakes, but on the other hand, they are making it impossible for financial advisers to operate a business, where we could genuinely help them. If they think issuing a press release will make even the slightest difference to the behaviour of retail consumers, they are even more stupid than I thought.

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